Did you know you could be losing money every paycheck by not taking advantage of a healthcare benefit?
That’s what happens when many of us choose not to opt into our company’s FSA — more affectionately known in the streets as a Flexible Spending Account.
If you’re not familiar, here’s a solid definition from Healthcare.gov:
A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs.
You don’t pay taxes on this money. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside.
Employers may make contributions to your FSA, but aren’t required to.
And here’s some other info you’ll likely wanna know:
You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options:
- It can provide a “grace period” of up to 2 ½ extra months to use the money in your FSA.
- It can allow you to carry over up to $500 per year to use in the following year.
Your employer can offer either one of these options but not both. It’s not required to offer either one.
There are three reasons I’m a fan of the FSA:
- It’s pre-tax, which means Uncle Sam isn’t invading your personal space.
- It reduces your taxable income, which might even stop you from crossing into the next tax bracket, where you would definitely smell the stink on Uncle Sam’s breath.
- It forces you to plan aka budget for health-related expenses that may pop up throughout the year. For example, you’re finally gonna get that chipped tooth fixed or replace the contact lenses that you’ve stretched well beyond their limit by only wearing them when you need to look good in public.
The other thing I love about FSA’s is you don’t have to wait until you save the money to spend the money. For example, I elected to set aside roughly $1,500 for 2016, which meant I could spend up to $1,500 at any point during the year regardless of how much had been deducted from my check. I went to the emergency room earlier in the spring and got a nice $800+ bill because WebMD told me that my acid indigestion was a heart attack.
<aside> It was incredibly scary. So scary that while boobookins drove me to the hospital, I actually tried to remember what my last tweet was. I didn’t wanna go out with the Jordan cryface meme being the last thing I offered the world. </aside>
Instead of only being able to spend $500 or whatever had officially been deducted from my pay at the time, I was able to spend against the $1,500 and cover the full cost of the bill. Even though I technically paid for it with my money, it was nice to not feel like I’d be eating ramen on wheat for a couple months to recoup the funds. I’m guessing the collective salt content of the ramen packets would’ve sent me back to the hospital and ate the rest of my FSA allotment, which would’ve been far from ideal.
If you’re not already taking advantage of your company’s flex spending option, I encourage you to look into it. Contact your Benefits department (likely a phone number or email address to some shared service center) with questions.
If you already made your benefit selections for the 2017 plan year, my bad yo. This will still come in handy if you decide to change jobs or have a Qualifying Life Event (think marriage or a human addition to the family).
If you read all this and thought “this ain’t nothing new,” here’s your prize:
Get Our Newsletter!
Join our free email community to get our newsletter with actionable tips and interesting reads to help you navigate your finances and career.